Moscow investment digest

October 2018

Dear Colleagues!

The Moscow Department for Investment and Industrial Policy, in cooperation with the Moscow City Investment Agency, presents a new issue of the Moscow Investment Digest.

NEWS

Moscow budget 2019 – investment and social orientation

The policy of the Moscow Government is aimed to attract investments, create the infrastructure for business development and improve the citizens' life quality. This contributes to economic growth and, accordingly, helps to increase the revenues to the Moscow budget. According to Sergei Sobyanin, Moscow has the resources for major systematic investments in transport, engineering and social infrastructure development. Today, every ruble from the city budget can bring three rubles of private investment. “In recent years, investments have increased more than twice and nearly reached RUR 2 tn,” Moscow Mayor Sergei Sobyanin said.

The draft budget was formed under low inflation, and the city's economy is steadily growing at a rate of 2-3% per year. In addition, the budget income is expected to grow by more than 8% by the end of 2018. For 2019–2021, a steady income growth at an annual rate of 5% or more is planned.

“Moscow still has a social budget. More than half of all funds will be used for the education, health care and social protection of the Moscow citizens, as well as cultural purposes and the development of sports, that are critical areas determining the residents' life quality,” the Mayor stated.

The Russian capital has gained a strong position in the best world rankings

The Fitch Ratings International Agency confirmed Moscow’s rating investment level. This means that the city has strong budget and credit characteristics. Its credit rating confirms that investors can invest funds without the risk of facing adverse economic conditions.

The city credit ratings assigned by two other international agencies, namely Moody's Investors Service and Standard & Poor's, also correspond to the investment level.

The experts of the Boston Consulting Group (BCG) have compared Moscow, Berlin, Hong Kong, London, Mexico City, New York, Paris, Sao Paulo, Seoul, Singapore, Tokyo and Shanghai in terms of the "new economy" development. Moscow ranked No.1 in the “Knowledge” category, in accordance with the number of jobs created in 2010, and No. 2 (after Berlin) in terms of technoparks availability. Moreover, Moscow holds the third place according to the number of technology startups, outpaced by New York and London only.

French automakers are interested in localizing their business in Moscow

The delegation of the Moscow Government participated in the round table “New transport mobility. Moscow Investment Opportunities” in Paris. The event was organized by Renault Russia.

“The Moscow industry is an important part of the city’s economy contributing significantly to economic development. We produce products with high added value. This corresponds to about 15% of the entire Russian manufacturing industry. That is why the city pays a lot of attention to industrial development creating the conditions for the modernization and localization of the modern enterprises oriented both on domestic and export markets,” Head of the Moscow Department for Investment and Industrial Policy Alexander Prokhorov said.

“Moscow provides regional tax and other benefits to the existing auto industry enterprises, which comply with a number of economic requirements,” Head of the Moscow City Investment Agency Leonid Kostroma explained. - Thud, in April 2013, the Moscow Government and Renault Russia CJSC signed an agreement to develop a car production project in Moscow. Under this agreement, CJSC Renault Russia invested RUR 14.3 bn in the development of the Moscow plant from 2013 to 2017. Over 613,000 cars have been produced there.”

The Technopolis Moscow SEZ may accommodate the production sites of foreign entrepreneurs

Moscow hosted a round table, where Austrian entrepreneurs were told about the city's investment opportunities for foreign companies. The event was attended by the representatives of the Moscow Government, the Moscow Chamber of Commerce and Industry, the Austrian Embassy, and the Vorarlberg Government.

“Foreign investors remain very interested in the Russian capital. Most popular sectors include construction, communications, trade and public catering, finance, as well as the industrial and high-tech sector, ” Head of the Moscow Department for Investment and Industrial Policy Administration Natalia Popkova said.

Austrian investors planning to locate their business in Moscow can receive the Government support for new industrial investment projects: income tax, property tax, land tax and land rent benefits. This reduces the regional tax burden to 17%. The benefits are currently granted to 75 companies, 42 of which have an industrial complex status. The volume of investments made by industrial complexes over 5 years is RUR 29.7 bn.

After the round table, the Austrian delegation visited the Technopolis Moscow Special Economic Zone (SEZ) to learn more about Russian and foreign resident companies' activities. The investors, the production sites of which are located in the SEZ, are entitled to the preferential conditions allowing to reduce the regional tax burden down to 47%.

Three more buildings are designed in the Skolkovo medical cluster

The Therapy building of the Skolkovo International Medical Cluster will accommodate Hadassah Medical, a branch of the Israeli Hadassah Clinic. The building opening is planned for 2022. An area of 20,000 sq. m. will be used to admit up to 100,000 patients per year.

Another building being designed is Bundang, a multifunctional “smart hospital of the future”, which is planned to be put in operation in 2022 and to render medical services to approximately 26,000 patients a year. The hospital is going to engage in scientific and educational activities.

The French Medicine Center, which might be operated by the Strasbourg University Hospital, will be opened for visitors in 2022. It will occupy an area of 15,000 sq. m. and provide medical services in such areas as oncology, cardiology, traumatology, orthopedics, urology, gynecology, etc.

The University of Strasbourg might become a base for a medical cluster educational project, namely a medical university. It will mainly provide continuous education programs for doctors; courses, seminars, and internships for young professionals, as well as distance learning programs with the use of digital imaging technologies.

The Moscow industrial zones can be used to build ca. 35 m sq. m. of real estate

Ca. 35 m sq. m. of real estate for various purposes can be built at Moscow the industrial and production sites, which makes the urban planning potential of industrial zones in accordance with the approved rules of land use and development.

A simplified procedure of the urban planning documentation issue was adopted for construction in industrial zones. After the land use and development rules approval, developers need to contact the Moscow City Architecture Committee, obtain an extract from the plot urban development plan, design the facility and begin construction.

Today, Moscow has 83 production and 208 industrial zones with a total area of 15.6,000 ha, which is 14.5% of the former Moscow territory.

Rotork has launched production in the Kalibr technopark

The formal opening of the new Rotork production site took place on October 31, 2018, in the Moscow technopark Kalibr.

The Rotork company was founded in 1957. Today, it is the world's leading developer and manufacturer of industrial drives and control systems, gearboxes and attachments for oil&gas and petrochemical complex. The company has 69 offices and 27 plants around the world, including Italy, Great Britain, Germany, Spain, Sweden, South Korea, the USA and the Netherlands.

OOO Rotork Rus is a Rotork PLC subsidiary that has been operating in Russia since 1996. Expansion is the next step of the company development in the Russian market.

Investors can rent spaces at a 30% discount

In May 2018, the city adopted a decree to reduce the initial annual rent for the nonresidential facilities by 30% upon rebidding, against the originally declared rent. At the moment, Moscow has put up for auction 16 such premises.

Head of the City Property Department Maksim Gaman said: “We conducted an analysis and found out that 35% of the auctions for the auctioned facilities were declared invalid in 2017. Accordingly, these premises remained vacant, both the city and the business suffering losses. The adopted standard will improve the investment climate simultaneously increasing revenues to the budget due to the increase of the number of facilities auctioned at prices that are more attractive for businesses.”

About 30 other premises will be put up for rebidding at a 30% rent discount, by the year end.

MACROECONOMICS

The Moscow economy is becoming more flexible, sustainable and innovative

In 2017, the volume of investments in fixed assets reached RUR 2 tn. This year, the investment growth is continuing, Moscow Mayor Sergei Sobyanin said.

“Investments are increasing in such areas as industrial production, trade, services, construction and other sectors. The Moscow economy growth is not quantitative only. Every year it becomes more flexible, sustainable and innovative. The city has created the basic elements of a modern innovative infrastructure, which includes over 2,000 different facilities: technology parks, co-workings, business service centers, equipment sharing centers, venture capital funds, etc.,” the Moscow Mayor said.

According to him, more than 20,000 enterprises, including both large companies and small startups, are operating in the high-tech sector today. In addition, there is a support system for innovative enterprises, the production of which is located within Moscow technology parks.

Over 15,000 IT companies are registered in Moscow

Moscow has become an IT development center. According to Moscow Mayor Sergei Sobyanin, the city has  created for this most favorable conditions: there are specialized educational institutions and commercial IT companies. In the future, the city is planning to assign technopark statuses to such sites.

“Moscow is considered to be a leader in the field of information technology. It is ca. 150,000 people that are officially employed by the Moscow IT companies,” Sergei Sobyanin noted.

Moscow technoparks have become the most attractive platform for high-tech businesses. Today, 33 of them are employing more than 1,750 companies offering 47,000 jobs. “They are granted substantial property, land, income tax benefits, provided with the assistance to attract investments,” the Mayor added.

Easy profit: the number of the Moscow individual entrepreneurs has grown

“During the eight months of this year, the number of new individual entrepreneurs registered in Moscow increased by 15%, or 2.4,000, against the period from January to August of 2017", Vice-Mayor of Moscow for Economic Policy and Property-Land Relations, Head of the Department of Economic Policy and Development of Moscow Vladimir Yefimov said.

Moscow ranks No. 1 among the Russian Federation constituent entities in terms of the increase in the number of individual entrepreneurs. The total number of individual entrepreneurs in Moscow as of September 1, 2018 was 308.7,000, which is 11.5% more than on September 1 of the previous year. Since 2010, the number of individual entrepreneurs in the city has increased by 71%. More than 60% of these are employed in the service sector, and about 25% in retail. The share of businessmen engaged in production has increased by 13% over the past three years.

SUPPORT MEASURES

Products of Moscow manufacturers will be promoted at global online platforms

The first products of Moscow manufacturers under the brand “Made in Moscow” will soon be presented at the world's largest online platform. These include bionic prostheses for children and adults, as well as 3D scanners.

In April, the Moscow Export Center (MEC) launched a pilot project to promote the Moscow products at global electronic trading platforms. By the end of 2018, it will help 100 Moscow manufacturers to enter Alibaba.com, the world's largest B2B marketplace. In total, it is planned to present at least 500 products during the year.

The Moscow Government will pay for the privileged accounts purchase and compensate half of all launching and setup costs. The MEC specialists will help entrepreneurs to create product cards designed for achieving maximum consumer effect, support the program participants at all stages of the launch and teach them how to work with marketing analytics tools.

Any Moscow company can take part in the MEC pilot project. The candidates willing to obtain privileged accounts should meet several requirements, including the requirement to pay taxes and produce goods within the city territory. Also, the choice of the expert commission is influenced by the positive dynamics of tax deductions to the city budget, the average annual employees' salary and revenues.

AUCTIONS

For the food industry cluster: four plots were put up for auction in the Troitsky and Novomoskovsky Districts

Four land plots for construction were put up for auctions in the Troitsky administrative district. The auction winners will be able to engage in the food industry cluster development in the Troitsky and Novomoskovsky Districts.

One of the auctioned >land plots is located in the Shchapovskoye settlement, has an area of 7.4,000 sq. m. and is intended for the construction of a food enterprise with warehouses with a total area of up to 11.8,000 sq. m. The initial lot price is RUR 16 m.  Another auctioned land plot in Shchapovskoye has an area of more than 10,000 sq. m. The initial price is 38.6 m RUB.

A land plot with an area of 40,000 sq. m. located in the Rogovskoye settlement was put up for auction at the initial price of RUR 92.6 m. It is intended for the construction of a food enterprise with a total area of up to 78,000 sq. m. Another land plot with an area of more than 30,000 sq. m. intended for the construction of a food enterprise with a total area of 51,000 sq. m is available for rent in Rogovskoye. The initial price of this lot is RUR 36.6 m.

Nearly 500 sq. m. in the historic house in Petrovka street were put up for auction

The non-residential premises with a total area of 485.6 sq. m. are located on the ground and 1st floors of the early twentieth century apartment building in Petrovka street will be put up for a city auction. All the utility networks are in operation, the ceiling height ranges from 3.7 to 4.8 m, electrical power supply is 220 V. A separate entrance is available.

The auction winner will become an owner of a commercial real estate facility located within the shopping area at the Moscow historical center. The premises have already been adapted to be used as offices. However, what specific application of the real estate will be up to the winner; the auctioned premises are of flexible purpose.

The initial lot price is RUR 84.7 m. Bids shall be accepted until December 4. The auction will be held on December 12, 2018.

Investors can build an industrial complex in the Southern Administrative District

The Department of City Property has put up for auction an industrial site located in the Moscow Southern Administrative District. The site is located in an industrial zone next to such major enterprises as the Soyuz factory and Motor Transport Combine No. 41. The total area of the land plot is 1.4 ha.  The initial lot price is RUR 26,119,000.

The auction winner will receive a land plot with an approved urban development plan. “The structural volume of the future enterprise will make 21,000 sq. m. The permitted construction type is an industrial complex facility, so the auction winner will be able to build a plant, a factory or a combine there", Head of the City Property Department Maksim Gaman said.

The auction will take place on December, 6.

445 sq. m. in the merchant house in Bolshaya Ordynka street were put up for auction

The auctioned object is a non-residential facility with an area of 445 sq. m. located in the basement of a residential building built in 1913. The ceiling height is 2.3 m. The building deterioration is 36%.

However, there is an encumbrance. The premises should be given the original layout in accordance with the Unified State Register of Real Estate, as the facility has undergone unauthorized redevelopment. It needs overhaul.

The initial lot price is RUR 22.2 m. Bids can be submitted until December 4. The auction will be held on December 12, 2018.

Moscow City Investment Agency

https://en.investmoscow.ru/agency/

The Moscow Digest archive is available at the Moscow Investment Portal.